I’m CEO of Digital Power Group, a tech and investment advisory, a Senior Fellow with the Manhattan Institute, a Faculty Fellow at the school of Engineering & Applied Science at Northwestern University, on the boards of the Marshall Institute, a think tank focused on space and missile defense, and Notre Dame's Reilly Center for Science, Technology & Ethics. I co-authored the energy-tech book "The Bottomless Well," was the tech strategist for a boutique venture fund, a tech advisor for Banc of America Securities, and co-authored a tech investment newsletter. I served in the White House Science Office under President Reagan, and studied physics at Queen’s University, Canada, and Rutgers. I may hold positions in or advise companies mentioned.

Fast Track to Jobs Through A North American Energy Market

“And tonight, I am announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union – because trade that is free and fair across the Atlantic supports millions of good-paying American jobs.” President Obama, February 12, 2013

Photo credit: Shutterstock

America’s sputtering economy and persistently high unemployment are urgent matters. Does anyone think opening up negotiations with the 27-member European Union (E.U.) will have a near-term impact on either side of the Atlantic? Meanwhile, there is a fast track to more jobs and wealth through expanded trade with just two countries, our neighbors Canada and Mexico. But there wasn’t a single mention of Canada in the SOTU speech. Mexico got one brief nod, in the context of Ford returning jobs to America from Mexico.

The President’s E.U. trade proposal has already been widely quoted, meeting quickly with measured bureaucratic approbation in Europe. Of course any progress towards more open and free trade is a net good for the world. And as the President noted in his SOTU, America and the E.U. account for 30% of world trade, and fully half of global GDP resides in these two regions.

But as always, the devil is in the details. Consider the statement from the White House’s U.S. Trade Office issued on the heels of this latest trade proposal:

“[The EU Partnership] would aim … to significantly cut the cost of differences in regulation and standards by promoting greater compatibility, transparency, and cooperation … Enhance cooperation on the development of rules and principles on issues of global concern … Tackle costly ‘behind the border’ non-tariff barriers that impede the flow of goods and services trade.”

Realistically, this effort will for quite some time yield work mainly for diplomats and consultants, and at hotels and restaurants where all the serial meetings will be held. It will be a long slog. This latest trade idea started at a U.S.-E.U. summit 18 months ago, with optimists hoping a final treaty could be signed in a couple more years.

The negotiations will have to unravel a thicket of issues that have been intractable for ages, and that impede freer trade. Challenges range from regulatory inconsistencies on everything from car bumpers to the acceptability of genetically modified crops (verboten in the E.U.) to a variety of food health and safety standard differences: e.g., you can’t sell chicken in the E.U. that has been washed in America with chlorine (a common 25-year-old antimicrobial treatment in the U.S.) The list of misalignments across dozens of categories and hundreds of product types is byzantine.

But nothing special need be done for American oil, natural gas or coal to be used in European cars, aircraft and power plants. No new policies, negotiations or special accommodations are needed to reconcile regulatory inconsistencies. The physics and economics of coal and diesel fuel look and work the same on both sides of the Atlantic.

And no new market incentives are needed. Europe needs what we have. The E.U. already imports more than half of all the energy it needs. By comparison, North America produces 85 percent of what is used on this continent. North America accounts for fully 20 percent of all global energy production, and is home to an unparalleled technological infrastructure which allows us to produce even more.

The idea that N.A. can become a net energy exporter to the E.U. and the rest of the world is not much of a stretch. It’s an opportunity ripe for acceleration.

Even though it is still a crude importer (imports are finally declining), the U.S. last year became a net exporter of refined petroleum products for the first time since 1949, with a lot of that fuel going to Europe. Now many natural gas players are eager to join the export club, willing to invest in liquefied natural gas (LNG) ports -– once the U.S. Department of Energy decides it is in the “national interest” to do so

U.S. coal exports have more than doubled in the last few years; Europe is a dominant destination. With more (privately financed) infrastructure, exports would grow faster yet. Germany, a vociferous advocate of alternatives to hydrocarbons, has in fact started building new coal-fired power plants, as has France and the U.K., the latter now a coal importer—ironic in light of Britain’s history with that fuel. Germany, with a 41% coal-fired grid, just might achieve its goal of an 80% ‘green’ grid by 2050, but that’s an infinity in political terms, and certainly irrelevant in time-frames for keeping factories and homes lit, and people employed.

It’s not just the E.U. that is hungry for all three of the fuels that North America has in abundance. According to the International Energy Agency, more than 1,000 coal-fired power plants are planned worldwide in countries like Japan, South Korea, India and China, Taiwan, Guatemala and Namibia. Global demand for natural gas is nearly insatiable. If you build it, they will consume it. And no vision for electric cars and biofuels comes close to putting a dent in the oil demands of the world’s one billion cars, which increases by another billion in the next two decades.

The Malthusians among us should be reassured that North America is in no danger of running out of hydrocarbon resources to help fuel the world’s economic expansion. The N.A. hydrocarbon resource base is some 700 percent greater than all the resources in the Middle East.

Let the E.U. trade agreement proceed apace. At the same time, why not form a North American energy production and export alliance to help fuel the economies of Europe and the rest of the world? Facilitating, ideally accelerating, N.A. hydrocarbon expansion would generate a flood of domestic jobs and government tax receipts. No subsidies are needed. No grants. No complex multi-party multi-issue negotiations. Our allies are ready. Mexico’s new President is making bold moves towards trying to rationalize and expand his country’s capabilities. Canada’s Prime Minister and Parliament have made clear their willingness.

The aggregate impact would be countable in millions of high-paying jobs and hundreds of billions – likely trillions – of dollars in economic benefits to North America, wherein the center of gravity for benefits is the U.S.. (For more on the scale of the opportunity see the excellent report from Citi, “Energy 2020: North America, the New Middle East?, and my earlier report Unleashing the North American Energy Colossus.) The benefits of all this for Europeans? A near-term route to more affordable, more reliable sources of energy, with all the attendant jobs and economic ripples that creates. Meanwhile all parties continue negotiating the measured path towards the nirvana of truly open all-product trade.

András Simonyi of Johns Hopkins University’s School of Advanced International Studies properly termed the potential of a boldly expanded U.S.-E.U. trade pact as a kind of “new NATO.” That would be great. But let’s not be naïve; it will take time. A kind of new NAFTA, energy-centric, would be far easier and far more impactful for American workers and European consumers. More prosperity here. Cheaper and more reliable energy for all, which collaterally brings more prosperity for all. <>

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